On world markets in 2016 the wholesale selling price of sugar began to aggressively grow. This trend lasts for several years. According to forecasts of the analytical Department of SUCDEN, to the end of 2019 the price of sugar may be a 12.5 to 15 cents per pound. The cost can affect just India, because in this country at the moment, a large unsold stock of sugar. This has led some global producers to increase the area of planting under cane from 1.18 million hectares to 1.28 million hectares under beet — from 168 hectares to 195 thousand hectares, to compensate for the loss of profit.
To sell sugar at a good price is beneficial throughout the world, especially when large exporters will start a shortage in the warehouses.
The head of the analytical Department of SUCDEN Marina Sidak, the price of sugar in Asian countries is 20% lower. Among the CIS countries the cheapest is Ukrainian sugar ($300- $420), and the most expensive — Belarus ($520-$640). Competition on the world market there, but each season it creates new suppliers, who were able to harvest and process more raw materials.
The leaders of the world market
Leaders of world production at the end of season 2018-2019. was India, which pushed Brazil into second place. Over the last season, India has collected a sufficient amount of inventory that led to the surplus on the balance of warehouses in 5 million tons. Now they need to liquidate before the new collection, so as not to devalue the sugar on the world market. According to forecasts of the analytical Department of SUCDEN, the harvest 2019-2020 will be approximately 26-27 million tonnes, while in 2018-2019, it was more by 10% — 30 thousand tons.
Brazil can return to the first position, if in Asia it will be a little rain, to fully provide the region with moisture. Water deficit causes a reduction in yield, so in India is expected to fall crop in the next season by 10%. But now in Brazil have more priority in the ethanol production than sugar and processing of sugar cane.
The third leading country — Thailand, where last season the market fell about 10% compared to 2017-2018.
“There are preconditions that production in Thailand will fall for another two years due to the decrease of the area for cane production, poor rainfall and accumulated stocks. Plantations, which were previously used for planting cane can be planted with alternative crops, for example, cassava due to better selling price than cane sugar” — says the head of analytical Department of SUCDEN Marina Sidak.
These three key countries that affect the world sugar market. Overall consumption in the world is slowly increasing. Experts at the International conference Sugar 2019 World said that in 15 years, the potential growth of sugar consumption per year average is 2.5%. The large consumption in India and Africa. China also consumes more than it produces, so promising for export. In the previous season around the world has produced more sugar than 2018, 9 million tons (up to 185,9 million tonnes) compared to 2017 (194,9 million tons).
In Europe expect that the price of sugar
In the EU, due to adverse weather last year was a bad harvest that led to lower production at 3 million tonnes compared to last season. But this has not led to a shortage of raw material, as imported sugar always compensate for the shortage.
“Over the past five seasons, the sugar exports of the EU is in the range of 1.4 to 3.6 million tons. Now exports half less than in the record 2017 and 2018, after the abolition of fees. According to our forecasts, this trend will not last for long,” says Marina Sidak.
It is expected that in 2019, the area of sugar plantations would decline by about 5.5%. The number of plantations depends on farmers. Farmers can start growing other raw materials, rather than sugar, which fell in the purchase price. In this case, farmers determine the area under other plantings.
Negatively affect the yield of sugar beet and a ban on the use of the pesticide of neonicotinoid in the producing countries of the EU. European farmers will have to spend more on plant protection, which would entail an increase in the price of the finished product. Next season sugar production is almost at the same level as in the past.
Ukraine can win the competition with Russia over the Chinese market and the CIS
The leading countries for the production of sugar in the CIS countries is Russia, Ukraine and Belarus. In Ukraine, 2016 and 2017 was a record amount of the crop, but to sell all the stocks failed on this day, therefore, the stock of unrealized potential.
In Ukraine, the yield is growing every year. Modernization of some enterprises is yielding results and every year we are able to process more sugar beet. In season 2019-2020 analysts predict a rise in production. With the reduction of sugar beet in Russia and Belarus will open the possibility for Ukrainian farmers to create competition for the sale of raw materials to China, the EU and the CIS. In the first place a potential market for Ukraine is Turkmenistan, Armenia, Tajikistan and Azerbaijan. In a year Ukrainians consume 1,25 thousand tons with production of 1.6 million tons, which led to the accumulation of warehouses of the export potential of 500 thousand tons.
China is a potential market for white sugar from EU countries.
Current estimates are that in 2019-2020, the sown area of sugar beet in Russia is 1110 hectares (or 1.3% by 2018), in Ukraine — 250 thousand hectares (-11% by 2018) and in Belarus — 100 thousand hectares (unchanged compared to the previous year).
Forecast of production in Russia — 6-6. 2 million tons, in Ukraine — 1.4-1.6 million tonnes in Belarus — 600-650 thousand tons.
In Ukraine, prices will fluctuate within $300- $420, in Russia — $450- $570, and in Belarus — $520- $640.
Sugar exports to the Ukraine plays a big role. Processing plants of sugar beet, occupying the second position on payment of taxes to the state budget of the country.
The sugar industry is one of the key agricultural sector of Ukraine. Next season’s projected production of sugar in the range of 1.5-1.6 million tons, with more than 40 operating plants in the cultivated area — 230 thousand ha.
Leading companies in the production of sugar during the past season are: “Astarta-Kyiv” (for 19.32%), “Radekhiv sugar” (of 18.41%) and “Ukrprominvest agro” (16,01%). Major market leaders in Ukraine in the sugar category I called “skirts” Kryzhopol (57,50%), “Radekhiv sugar” (97,64%) and “dawn skirts” Gaisin (64,98%).
The export of sugar was sent to the main country-importers of 586 thousand tons. The dynamics shows the decline in exports in the last season by 2% compared to the same period of 2017.
Potential risks in the global market
High grain prices may lead to a reduction in acreage of sugar beet. Farmers can use their land for the cultivation of the relevant raw materials, which is currently more in demand.
There is a risk for many manufacturers don’t realize the potential reserve, and it will go in next season, thus the amount of raw materials will accumulate. Uncertain global economy and the current purchasing prices negatively affect the overall market.
The list of risks also includes the problems of logistics, so if a good harvest is not always possible to safely send the product.
The forecast for the season 2019-2020
For Ukrainian farmers the next season will be fruitful. But first and foremost, according to market players, needs to settle a price in the country. If there is a reduction in the processing of sugar in Russia and Belarus, it will give the ability to export more to the countries of the CIS.
“On the world market, the level of deficit will vary around 4 million tons, and the main problem is the large stocks of raw materials, especially in Asia. With a good harvest and low prices of raw materials will again accumulate in the warehouses, but the producers are not profitable to sell the product at a minimum cost. To export promising China, and with good demand in this country called high-end market,” says Maria Sidak.
Farmers assess the overall situation of the agricultural sector as a complex. Recent grants to support was issued in 2017. For the current year in the budget did not include money for support of the agricultural sector of the state.
Also in Ukraine there are problems with hired employees. Due to a visa-free regime with many companies in Ukraine are “staff shortages”. The Ukrainian Association has prepared a number of proposals for consideration by the Cabinet of Ministers in 2019, including the question of making sugar in the product list with minimum prices.
Experts on the sugar market said that Ukraine may take one of the leading positions in the export of sugar in the CIS countries. The efficiency of our producers is higher than that of the European partners. It should be noted that some countries have exhausted their potential to improve the cultivation of sugar beet. Ukrainian producers of these opportunities is.